Solution BriefIBM Analytics

Profitability Analysis Quick Start TemplateSpeed, agility and foresight with IBM Planning Analytics

OverviewThe IBM® Profitability Analysis Quick Start Template is a customizable, pre-configured model that helps you analyze your organization’s profitability using IBM Planning Analytics—the same powerful solution you use for planning, budgeting and forecasting. The template helps you identify opportunities for improving profitability and supports the business with detailed insights about profitability by department or business area. Using the template, you can analyze and explore profitability across product families and time periods quickly and easily, using business drivers to guide decision making.

The challenge of enterprise-wide profitability analysisIn any business, in any industry, profitability is essential to growth and even to survival. Profitability analysis, in turn, is essential to identifying the products, regions, customers and sales channels that are the most or least profitable. Effective analysis helps you learn not only which business areas are the most profitable, but helps you understand the underlying factors that contribute to profitability. That knowledge can guide decision making so that the positive factors can be replicated and the negative factors minimized or eliminated.

Organizations typically rely on high-level data to analyze economic value by cost center or business unit. But Finance teams often struggle to gain an accurate, granular view of profitability. They have to allocate costs at an aggregate level, because the volume of iteration detail makes the information too difficult to code. In addition, gathering input from contributors can lead to inconsistencies, as drivers and assumptions are not easily controlled across the business.

Highlights • Jump-start implementations and

accelerate adoption

• Perform comprehensive profitability analysis, and drill down for a granular view of business unit profitability

• Customize allocations and phasing with dynamic models

• Ensure consistency for accurate profitability comparisons across the business

• Cascade responsibility and share insights

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Accuracy suffers, as the complexity of cost allocations becomes obscured in an effort to make data entry simpler for non-finance users. In addition, when organizations use spreadsheets to perform profitability analysis, they are often faced with silos of data from different parts of the business that are difficult to combine for a single, coherent view of profitability.

IBM Planning Analytics Quick Start Templates—Planning models tailored to your industry or function

Quick Start Templates are pre-configured data, process, and policy models that reflect the collective best-practice knowledge of IBM experts and leading IBM customers. Templates enable organizations to jump-start their software implementations and streamline project implementation schedules. IBM’s growing portfolio of template models addresses a number of essential functional areas as well as the unique needs of specific industries. They help organizations improve software project success rates as they drive faster return on investment.

Quick Start Templates are used with IBM Planning Analytics, the performance management solution built on the fast, scalable, in-memory OLAP engine of IBM TM1®. Available for deployment in cloud, on-premises or mixed deployment environments, IBM Planning Analytics enables Finance teams to perform multidimensional analysis and calculations for the most demanding business scenarios.

Quick Start Templates are available at no charge to IBM customers (subject to license terms).

Profitability Analysis Quick Start Template—for agile, integrated analysis The Profitability Analysis Quick Start Template offers finance teams a way to overcome the limitations of spreadsheets and get an accurate picture of profitability across the enterprise.

Designed for use in IBM Planning Analytics, the template enables finance teams to clearly identify and track profitability performance across every department or group by accurately and consistently allocating the cost of doing business between cost centers and profit centers. The template’s dynamic model enables finance teams to adjust allocation methods and cascade the responsibility for allocating costs down to business-unit owners, safe in the knowledge that the calculations remain transparent, consistent and unbroken.

The Profitability Analysis template gives users an immediate insight into the performance of the business, once the cost of doing business has been allocated across revenue streams. Cost allocations follow an iterative process which can be tailored to the structure of the individual company. Users can easily manage the phasing of cost allocations and make adjustments quickly, so that, as costs change, the effects are reflected in the model instantly.

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Driver-based analysis for speed, agility and foresight Driver-based modelling provides the depth and complexity necessary to accurately calculate costs and profitability performance. Driver-based models enable non-finance users to quickly and accurately contribute to the larger process. Moreover, this approach allows you to involve more people more often to further increase accuracy and relevance.

By using drivers to model cost categories and business areas, finance professionals can perform detailed analysis with the confidence that the underlying data is accurate and consistent. They can make apples-to-apples comparisons and identify opportunities to better align corporate and operational goals. This approach enables finance analysts to create and compare alternative scenarios to determine the optimum strategy for improving profitability. And with the ability to gather critical contributions from the people closest to the business, organizations can more easily anticipate and react to changing circumstances.

Figure 1: Comprehensive analysis provides critical insights that enable organizations to distinguish the most profitable areas of the business.

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The template in action—Comparing costs and profits Finance teams can quickly and easily cascade the Profitability Analysis template to those who are responsible for allocating costs throughout the company. By removing the manual, calculation-intensive modelling that is inherent in spreadsheet-based solutions, the template can help finance teams focus on

getting better information — information that is more timely, more accurate and more relevant.

The template lowers the time and effort needed to build a robust analysis and accurately highlights true contribution. The result for finance is the ability to support the business more effectively, by identifying opportunities for improved profitability in targeted areas within the organization.

Figure 2: The template includes rich visualizations that provide immediate visibility into factors affecting profitability.

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Communicating and sharing plansThe Profitability Analysis template enables you to create and share plans using graphically rich scorecards that communicate critical information at a glance. Graphs, charts and tables feature drill-up and drill-down functionality to display costs at different levels of the organization so executives can see how specific business lines contribute to the totals, rather than just receiving overall figures for a particular project or department.

ConclusionFor finance teams who need a faster, easier way to analyze profitability and manage the allocation of costs, the Profitability Analysis Quick Start Template enables them to support the business with detailed, consistent and accurate insights about profitability and contribution.

By replacing manual, spreadsheet-based processes with flexible modeling capabilities and integrated workflows, the template can help reduce errors, improve control and boost accountability. Most important, the template can help finance teams focus on information that’s more timely, more accurate and more relevant, and help them improve profitability across the enterprise.

About IBM AnalyticsIBM Analytics software delivers data-driven insights that help organizations work smarter and outperform their peers. This comprehensive portfolio includes solutions for business intelligence, predictive analytics and decision management, performance management, and risk management.

IBM Analytics solutions enable companies to identify and visualize trends and patterns in areas, such as customer analytics, that can have a profound effect on business performance. They can compare scenarios, anticipate potential threats and opportunities, better plan, budget and forecast resources, balance risks against expected returns and work to meet regulatory requirements. By making analytics widely available, organizations can align tactical and strategic decision-making to achieve business goals. For further information please visit ibm.com/analytics

Request a callTo request a call or to ask a question, go to ibm.com/analytics/contactus. An IBM representative will respond to your inquiry within two business days.

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